In Re Northern Pigment Co.

71 F.2d 447, 22 C.C.P.A. 149, 1934 CCPA LEXIS 156

• Court: Court of Customs and Patent Appeals
• Decided: May 23, 1934
• Docket: Customs Appeal 3746
• Status: Published

Opinion

BLAND, Associate Judge.

The Northern Pigment Company et'al. have here appealed from the findings and recommendations made by the United States Tariff Commission pursuant to section 337, Tariff Aet of 1930 (19 USCA § 1337).

Said findings and recommendations were made after an investigation was made by said Commission upon complaint of the Magnetic Pigment Company, a New York corporation, in which complaint it was alleged that Bruce Ross, Limited, a Canadian corpora^ tion of Toronto, and others, were causing to be imported into this country yellow oxide of iron pigments produced by the Northern Pigment Company, a Canadian corporation, and made by employing the method of two United States patents under which the said Magnetic Pigment Company, as exclusive licensee, had been, for ten years, manufacturing such pigments commercially in tbe United States.

After hearing the interested parties and making independent investigation, the said Commission made certain findings and recommendations which are set out in the margin. 1 Pending the investigation by the Tar iff Commission which was instituted on February 24, 1933, the Commission recommended to the President that entry of certain iron compounds suitable for pigment purposes be excluded except under bond in accordance with the provisions of subdivision (f) of section 337,19' USCA § 1337 (f). The Secretary of the Treasury, pursuant to the President’s request, issued on March 8, 1933, instructions to collectors of customs in conformity with the Commission’s recommendation.

With the exception of the allegation iñ the complaint with respect to the use by the Northern Pigment Company of the trademark “Norpico,” which is alleged to be similar to the registered trade-mark “Mapico” of the Magnetic Pigment Company, the Commission made findings on all material allegations, all of which findings of law and fact were regarded by the Commission as being in harmony with and a justifiable basis for the recommendation for the issuance of an or der of exclusion. Practically all the findings were against the contentions of the respondents. On the trade-mark question the Commission made no finding whatever.

The appeal here by the Northern Pigment Company, Limited et ah, involves a great number of questions presented in nineteen assignments of error, but the controversy chiefly resolves itself into a few fundamental questions of law, which questions will be separately discussed in this opinion.

It is first contended that the action brought by the Magnetic Pigment Company was a fisbing expedition; that tbe oxide pigments made by tbe Northern Pigment Company, although, similar, were better than those made by the Magnetic Pigment Company in this country, and that they were made by a secret process known only to the Northern Pigment Company; and that the investigation was instituted for the purpose of discovering appellants’ method.

The Commission found, and we think properly, that the Northern Pigment Company, in the production of the said imported oxides, used the process disclosed by certain patents to Penniman and Zoph, Nos. 1,327,- 061 of January 6,1920, and 1,368,748 of February 15,192L, under which patents the Magnetic Pigment Company was the exclusive licensee for that portion of the United States east of the states of Montana, Wyoming, Colorado, and Texas. We think the record abundantly supports this conclusion. The law is settled, however, that if there is any substantial evidence which supports the findings of the Tariff Commission, its findings will not he disturbed in this court, since our jurisdiction is, by statute, expressly limited to questions of law. Frischer & Co., Inc., ct al. v. Bakelite Corp. et al., 17 C. C. P. A. (Customs) 494; Id. (Oust. & Pat. App.) 39 F.(2d) 247, 257.

Both parties have, in their briefs, quoted testimony which, we think, constitutes some substantial evidence that the Northern Pigment Company, in producing the imported merchandise, employed the methods of the patents. Also, the testimony with reference to the analysis of the imported material is some substantial evidence that the material was made by the said Penniman and Zoph patented processes. Many other circumstances and facts disclosed by the record are convincing, we think, that the Northern Pig ment Company produced, its oxides, which are similar, if not identical, to those produced by the Magnetic Pigment Company, by the use of the process of said American patents.

The record shows that the president and the secretary-treasurer of the Northern Pigment Company were both formerly employed at the plant of the Synthetic Iron Color Company in California, a licensee under the Penniman and Zoph patents. Both of these individuals worked under the direction of Zoph, one of the inventors. It is shown in the record how the Northern Pigment Company in Canada was established and why. We quote from the testimony of Fred C. Berling, the secretary-treasurer of the Northern Pigment Company:

“We discussed raising capital and starting a small company to manufacture for these processes and we considered various locations. There were two licensed manufacturers on the Pacific Coast and the tonnage consumed in that territory, in view of the fact that there were two manufacturers, decided us against trying to locate on the Pacific Coast. In the East competition would also be keen, because it was covered by the Magnetic Pigment Company of Trenton. We corresponded with the Boards of Trade of ■various large Canadian cities, and secured data on importations of oxide of iron into Canada, and learned that most of the iron oxides used in Canada were imported, and we were able to learn about no manufacturer of yellow iron oxides or red iron oxides in Canada. We gave further consideration to Canada, because our capital was very limited and we knew that the reason — or, rather, both being employed by a plant who used the patented process, would be held against us, in the States; and there was no doubt that we would be brought into court on patent litigation, and we knew it would be impossible to build a plant and bring it into production and to defend ourselves with the small amount of capital we had available.

“So, taking everything into consideration we decided to study the situation in Canada from an economic standpoint.”

This leads up to the second contention of appellants, to wit, that the record shows that no efficiently and economically operated United States industry is shown to have been injured or that the importation of said oxides has the tendency to destroy or substantially injure such an industry.. In this connection it is urged that while the Magnetic Pigment Company is a large producer in the United States of said pigments, it is not the sole industry, and furthermore that the importation of the cheaper produced product of appellants would tend to destroy a monopoly, protect the public, and thus produce a healthy condition.

We have carefully gone into the record on this phase of the question, and we conclude that the finding in this respect by the Tariff Commission was fully justified. It was shown that owing to the location, lack of advertising expense, lack of patent royalty expense, conditions of labor, etc., the Northern Pigment Company sold, in certain quantities, its product at 4% cents per pound, f. o. b. Toronto. This price was subject to a discount of 1 per cent, in ten days and must also have included a commission to Bruce Boss, Limited. The actual production cost of the product of the Magnetic Pigment Company at Trenton, N. J., in 3932', was 6.341 cents per pound. It is shown in evidence that by reason of the importation of iron oxides produced by the Northern Pigment Company and offers to sell same to the customers of the Magnetic Pigment Company at a lower price than the cost of production of the Magnetic Pigment Company, the business of the Magnetic Pigment Company during the years 1931 to 1932 was a failure. These and other facts in the record, we think, are not only some substantial evidence supporting the finding of the Commission that the importation of the pigments manufactured by the Northern Pigment Company tended to destroy or substantially injure an industry of the United States, but conclusively show this fact.

Third. Before the Commission, appellants stated that they did not question the validity of the patents, but in this court they directly challenge the validity of the patente by contending that one of them is void by reason of public use of the process for more than two years prior to the application for such patent, and that both patents are void because the process steps as well as the product are old. In Friseher & Co., Inc., et al. v. Bakelite Corp. et al., supra., this court held as follows: “The second questiou is concerned with the right or duty of tho Tariff Commission to pass upon tho validity of tho patents involved herein. Counsel for both the complainant and respondents proceeded upon the theory, in this court, that the Commission had a right to pass upon the same and much testimony was taken before the Commission on that question. But, whatever the concessions of counsel may be, we are clearly of opinion that it was neither the right nor the duty of the Tariff Commission to pass upon the question as to whether complainants’ patents were properly issued or not.”

We are of the opinion that since the validity of the patents was not a proper consideration for the Tariff Commission, it is not a proper matter for consideration here on appeal. Wo find nothing in the Tariff Act of 1936, or the legislative history with reference thereto, that differentiates the law applicable to this case from tho law which was applicable to the predecessor provision of the Tariff Act of 1922i, concerning whieh the above-quoted language was used.

Fourth. The¡ next question raised by the appellants is, we think, the most important one in the case and by reason of its importance it is entitled to most careful consideration. It is contended by the appellants, in substance, that before the provisions of section 337 of the Tariff Act of 1930 (19 USCA § 1337) may he applied, it is necessary for the Tariff Commission to find not only “unfair methods of competition,” as that term is defined by the courts, but also “unfair acts in the importation”; that both must be found since Congress in section 337 used the conjunctive “and” instead of the word “or." It is then argued that under numerous judicial interpretations of the term “unfair methods of competition,” the importation into this country of an article which could not be manufactured and sold without the consent of the inventor of the article or his licensee does not constitute unfair methods of competition. It is furthermore argued that it is not an unfair act within the meaning of that term as used in the section.

Section 337 (a) of the Tariff Act of 1930 (19 USCA § 1337 (a) reads as follows:

“Sec. 337. Unfair practices m import trade.

“(a) Unfair methods of competition declared unlawful. Unfair methods of competition and unfair acts in the importation of articles into the United States, or in their sale by the owner, importer, consignee, or agent of either, the effect or tendency of whieh is to destroy or substantially injure an industry, efficiently and economically operated, in the United States, or to prevent the establishment of such an industry, or to restrain or monopolize trade and commerce in the United States, are hereby declared unlawful, and when found by the President to exist shall be dealt with, in addition to an> other provisions of law, as hereinafter provided.” [Italics ours.]

This exact question has not been passed upon before, but we think both the reasoning and result of our decision in the Friseher Case, supra, are controlling of our decision here. In the Friseher Case there was involved a patent situation similar to the one at bar and also, the violation of a trade-mark right. In that case we said:

“The sole remaining question for decision is whether such facte are sufficient, in law, to constitute ‘unfair methods of competition and unfair acts in the importation of articles into the United States, or in their sale by the owner, importer, consignee, or agent of either,’ as provided in said section 316 (a), 19 USCA '§ 174.

“H. R. 7456, -which afterwards became the Tariff Act of 1932, did not, as it passed the House of Representatives, contain the present section 316. This section was inserted by the Senate Committee on Finance and, as originally reported to .the Senate, provided that the President might designate any executive department or independent establishment of the government, or both, to investigate any alleged violation and report their findings in the same to him. As the bill passed the Senate, the United States Tariff Commission was substituted as a fact finding agency ‘on complaint under oath or upon the initiative of such department or independent establishment.’ In conference, this section assumed the form in which it appears in the law. In reporting the bill to the Senate, the report of the Finance Committee states: ‘The provision relating to unfair methods of competition in the importation of goods is broad enough to prevent every type and form of unfair practice and is, therefore, a more adequate protection to American industry than any antidumping statute the country has ever had.’

“In view of this statement, and having in mind that one of the express objects of the Tariff Act of 1932, as stated in its title, was ‘to encourage the industries of the United States,’ it is very obvious that it was the purpose of the law to give to industries of the United States, not only the benefit of the favorable laws and conditions to be found in this country, but also to protect such industries from being unfairly deprived of the advantage of the same and permit them to grow and develop.

“What constitutes unfair methods of competition or unfair acts is ultimately a question of law for the court and not for the Commission. Fed. Tr. Com. v. Gratz, 253 U. S. 421, 427, 40 S. Ct. 572, 64 L. Ed. 993; Standard Oil Co. v. Fed. Tr. Com. (C. C. A.) 273 F. 478, 17 A. L. R. 389; Am. Tobacco Co. v. Fed. Tr. Com. (C. C. A.) 9 F.(2d) 579; Fed. Tr. Com. v. Curtis Pub. Co., 269 U. S. 568, 589, 43 S. Ct. 219, 67 L. Ed. 408. Each ease of unfair competition must be determined upon its own facts, owing to the multifarious means by which it is sought to effectuate such schemes. Fed. Tr. Com. v. Beech Nut Co., 257 U. S. 441, 453, 42 S. Ct. 159, 66 L. Ed. 307,19 A. L. R. 882.

“The appellants were importing material which constituted an infringement of the patent rights of the complainant Bakelite Corporation. The fact that the respondents purchased the same in a foreign country where their manufacture was in accordance with law, and that they may have lawfully imported the same into this country, does not alter the ease. It has been held that where a person was authorized, under the laws of Germany,'to sell a certain product there, purchasers from him could not be thereby authorized to sell the articles in the United States in defiance of the rights of patentees tinder a United States patent. The sale of articles in the United States, under a United States patent, cannot be controlled by foreign laws. Boesch v. Graff, 133 U. S. 69-7, 10 S. Ct. 378, 33 L. Ed. 787.

“The same is true as to the registered trade-marks of Bakelite Corporation. The monopoly in ease of a United States patent is more extensive, but there is no sufficient reason for holding that the monopoly of a trade-mark is less complete. Where imported goods were marked with a French trademark, it was held that they could not be sold in the United States when such mark was the same as the trade-mark of the plaintiff in the United States. Ownership of goods does not carry the right to sell them with,a specific mark; Bourjois & Co. v. Katzel, 269 U. S. 6S9, 43 S. Ct. 244, 67 L. Ed. 464, 26 A. L. R. 567.”

It seems to us that the above is quite applicable to the facts in the case at bar, with the exception of that part which relates to the registered trade-marks, since in the instant case no finding on that subject was made by the Tariff Commission.

In the Friseher Case, supra, we discussed the authorities on the “methods of unfair competition” and there pointed out the importance of “palming off” the merchandise of one person for that of another in acts of unfair competition. The “palming off” doctrine was an important element in the Friseher Case, because in that case there was evidence of such palming off.

It is well settled, we think, that unfair acts which will be enjoined by equity in the same manner as are the acts of palming off may consist of deceitful advertising which injures a competitor, bribery of employees, secret rebates and concessions, and other devices of unfair trade. See Nims, Unfair Competition and Trademarks (3d Ed.) p. 36; also, Witherow Steel Corp. v. Donner Steel Co. (D. C.) 31 F.(2d) 157; Vortex Mfg. Co. v. Ply-Rite Contracting Co. et al. (D. C.) 33 F. (2d) 302, 313.

We are of the opinion that when Congress used the phrase, in section 337 (a) of the Tariff Act of 1930', 19' USCA. § 1337 (a), “unfair methods of competition and unfair acts in the importation of articles into the United States,” it did not intend that before such methods or acts could be stopped, the act had to fall within the technical definition of unfair methods of competition as it has been defined in some of the decisions, but we think that if unfair methods of competition or unfair acts in the importation of articles into the United States are being practiced or performed by any one, they are to be regarded as unlawful, and the section was intended to prevent them. We are furthermore of the opinion that the importation into this country of a product made without the authority of a patentee, under the process of an American patent, such as is shown in the ease at bar, falls within the provision “unfair methods of competition and unfair acts, in the importation of articles into the United States.” In re Orion Co., 71 F.(2d) 458, 22 C. C. P. A. (Customs) -, decided concurrently herewith.

From the case of Standard Oil Co. of Maine v. Standard Oil Co. of New York (C. C. A.) 45 F.(2d) 399; 311, we quote the following: “The law of unfair competition in trade is of comparatively recent origin and growth, Nims on Unfair Competition, § 2; but it has been and is being extended to cover all instances of fraudulent interference with another business. Courts of equity are extending the principles of equity to enjoin unfair competition in all its phases. * * * ”

The following is quoted from Nims on Unfair Competition and Trade-Marks (3d Ed.) p. 38: “§ 9a. Passing off no longer a requisite of the unfair competition action. That this action has expanded in recent years cannot be doubted. It is no longer true that there is no cause of action unless passing off is present. Passing off is but one of various practices that are actionable as unfair competition. The growth has been gradual but constant. At the outset, actual passing off was enjoined. Later, although no actual passing off was proven, injunctions were issued against acts that might result in passing off, if continued. Later still, acts were enjoined which injured the plaintiff even though no passing off was present or threatened. * * * ”

Further discussion of this phase of the case is not regarded as of importance here. Congress has used a broad and inclusive term, and we think the context of the provision and the purposes for which it was enacted, as shown by its legislative history, clearly indicate that the acts of the respondents, as found by the Commission, clearly fall within the term in controversy.

Fifth. It is argued at great length by appellants that in view of the fact that Congress made a special provision authorizing customs officers to stop the importation of goods, which if sold here violated American registered trade-mark rights, and made no mention there or elsewhere of the violation of a patent right, it could not have contemplated the violation of a patent right being within the purview of the term used.

We find no merit in this contention. The enforcement of the trade-mark provision was one which could easily be left to the customs officers. It could bo satisfactorily handled administratively. The determination of when an unfair method of competition had been followed or an unfair act in importation had been practiced called for such investigation and fact finding as to make such a determination by the regular customs officers almost an impossibility. It is not difficult to see why Congress would not desire to thrust such a duty and responsibility upon the customs officers at the ports. In view, however, of the solicitude of Congress to- protect American trade-mark rights, it would seem to follow that it would be and was also concerned with the protection of American patent rights, and we believe it intended that the section in controversy should meet this particular situation as well as other unfair acts.

This court, in the Friseher Case, quoted with approval the following finding of the Tariff Commission: “The situation presented by the manufacture in the United States of articles infringing patents is quite different from that presented by the importation of such articles made abroad. In the case of the sale of articles manufactured ill the United States the infringing manufacturer can be proceeded against and thus the unfair practice be reached at its source. Domestic patentees have no effective means through the courts of preventing the sale of imported merchandise in violation of their patent rights. Customs officers are forbidden to disclose information concerning importations. Customs Regulations 1923, Articles 1131, 1323. When such merchandise is delivered from customs custody it may be and frequently is distributed throughout the United States. The difficulties which confront a patentee seeking to enforce his rights through the courts are practically insurmountable. He is required to proceed against each individual dealer selling the infringing articles, which of course would lead to a multiplicity of suits with little likelihood that all infringing dealers could be reached. The cost of the numerous suits with the small amount of damages which may be recovered in any one suit discourages resort to the courts. Moreover, a decree obtained against one dealer would have no binding effect upon others, and by the simple expedient of changing the consignees the effect of a decree when secured would be nullified. Unless, therefore, section 316’ may be invoked to reach the foreign articles at the time and place of importation by forbidding' entry into the United States of those articles which upon the facts in a particular case are found to violate rights of domestic manufacturers, such domestic manufacturers have no adequate remedy.”

It has long been settled that articles patented in the United States cannot be manufactured abroad, imported, and sold in violation of the rights of the patentee. Boesch v. Graff, 133 U. S. 697, 10 S. Ct. 378, 33 L. Ed. 787. In the instant ease the record shows that there were a number of distributers or handlers of the Northern Pigment Company’s product in competition with the product of the Magnetic Pigment Company. Upon being notified by the Magnetic Pigment Company to desist, most of them ceased such efforts, but others were found to take their places. It seems obvious that there is no adequate remedy to protect the rights of a complaining American industry, such as is shown by the record at bar, unless the provisions of the section at bar may be invoked. Moreover, the section contains this significant clause: “ * • * should be dealt with, in addition to any other provision of law a « reason or logical basis to support the conclusion that Congress, by using both the phrase “unfair methods of competition” and “unfair acts,” did not intend to/ cover the violation of patent rights, such as are involved here, has been suggested to us. Obviously one of the purposes of the enactment of the section, as well as the whole act, was for the encouragement of American industry. The proper application of the legislation here in controversy certainly would encourage and help a great many American industries.

It has been suggested that Congress could not have contemplated the exclusion from importation of foreign made goods upon the basis of an invalid patent, and that if the Tariff Commission and this court have no right to pass upon the validity of a patent, the result would be that lawful and proper importations could be excluded by reason of the existence of a wholly invalid patent. The courts, in many instances, have held that patents issued by the United States Patent Office will carry with them the presumption of validity. Seymour v. Osborne, 11 Wall. (78 U. S.) 516, 538, 20 L. Ed. 33; Frischer & Co., Ine., et al. v. Bakelite & Co. et al., supra. Forums have been provided where the validity of such patents may be tested. It is hardly presumable that it was intended that the Tariff Commission, a fact-finding body, should assume such a responsibility. Notwithstanding this situation, which appellants seem to think is anomalous, we conclude that Congress intended to prohibit such importations even though the validity of the patent had not been passed upon and could not be passed upon by the Tariff Commission or this court upon appeal from the Commission. Appellant speaks of the violation of the rights of American citizens. It has often been held that the importation of foreign goods is not a right but a privilege. Board of Trustees of the University of Illinois v. United States, 20 C. C. P. A. (Customs) 134, T. D. 45773; affirmed, 289 U. S. 48, 53 S. Ct. 509, 77 L. Ed. 1025.

Sixth. Appellants also contend that the section is unconstitutional for the reason that it is indefinite and leaves the determination of what are unfair methods and unfair acts to the Tariff Commission, and for the further reason that it attempts to delegate to the President judicial powers. In the Friseher Case, supra, we held that the predecessor section 316 of the Tariff Act of 19255 (19 USCA §§ 174-180) was constitutional, and cited Hampton, Jr., & Co. v. United States, 14 Gust. App. 350, T. D. 42030, affirmed, 276 U. S. 394, 48 S. Ct. 348, 72 L. Ed. 624, as supporting authority. Appellants have attempted to point out differences between the predecessor provision of the Tariff Act of 1922 and that of the Tariff Act of I9601 now under consideration. It is needless for us to go into an extended discussion of this question, since we see no merit whatever in the contention. No differences between said provision of the Tariff Act of 1922 and that of the Tariff Act of 1930 here in controversy have been pointed out that would cause us to regard this court’s holding in the Friseher Case, supra, as not controlling of the issue of constitutionality in the case at bar.

Appellants’ brief contains a separate paragraph headed as follows: “This court has never hesitated to reverse its decisions when convinced error had been committed.” At the end of this paragraph, certain of our decisions have been cited. As we understand it, this is a concession that the main issue involved in this case was decided in the Friseher Case, supra, and that this appeal is, in effect, for the purpose of bringing about a reversal of said decision in that respect. We have no quarrel with appellants’ attempt to bring all material facts before this court with a view of avoiding the force and effect of that decision and of attempting to bring about a reversal of it if possible, and although appellants have very fully and very ably discussed the many different questions raised, we are convinced of the correctness of our conclusion and reasons in that decision and think it is for the most part controlling in this case as we have hereinbefore indicated.

We conclude that there are no errors of law in the findings of the United States Tariff Commission herein and that they should he, and are, therefore, affirmed.

Affirmed.

HATFIELD, Associate Judge, did not participate.

GARRETT, Associate Judge

(specially concurring).

As in the case of In re Orion Co., decided concurrently herewith, 71 F.(2d) 458, 22 C. C. P. A. (Customs)--, I agree that the doctrine announced by the majority in the case of In re Friseher & Co., Inc., et al. v. Bakelite Corp., 17 C. C. P. A. (Customs) 494, T. D. 43964, is controlling here.

It is true that in the Friseher & Co. Case, supra, the majority held that in addition to alleged patent infringement there were certain other acts comprising “unfair acts,” while in the instant case and in the Orion Co. Case, supra, the sole act is the alleged patent infringement, but the clear implication of the Friseher & Co. decision, if not the positive holding, left no doubt as to the meaning of the majority, and to dissent upon any theory that the question was not there foreclosed would, I feel, be merely to quibble. J do not agree to all the assertions and expressions of the majority in the instant case, but, constrained by the doctrine of the Friseher & Co. Case, supra, I concur in the conclusion.